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How to deal with balance transfer credit card problems

7 balance transfer traps to watch out for when you want to pay off your credit card debt.

Updated

Fact checked

Balance transfers give you a way to consolidate and pay down your existing credit card debt, often with a low or 0% p.a. interest rate during the introductory period. But there are a lot of terms and conditions around balance transfers that can trip you up. So, let's take a look at some of the most common problems – and ways you can deal with them.

Problem: Applying for a card with the same issuer

Most balance transfer credit cards allow you to move debt from an Australian credit card, store card or charge card that's held with a different issuer. For example, if you had a credit card from Westpac, you wouldn't be able to transfer your balance to another Westpac card.

It's not always clear that you're applying with the same issuer either, because some of them also underwrite credit cards for other brands. For example, Citigroup underwrites credit cards for a range of brands including Citi, Suncorp, Virgin Money and Qantas Money.

However, if you do apply for a new credit card with the same issuer, you could still be approved for the card – and even the balance transfer in some cases – but not the 0% p.a. introductory rate. So there’s potential to end up with more credit cards and no lower interest rate. This makes it important to check which banks you can transfer between before applying.

What to do about it

If you accidentally apply for a balance transfer with your existing card issuer, the outcome and solution will depend on when you discover this issue. Some of the potential scenarios and strategies include:

  • During the application process
    If you have just applied for the new credit card, or have just received conditional approval but have NOT submitted supporting documentation, call up the credit card company and cancel the application. Let them know that your existing debt is with the same issuer, and that you have just realised this means you won’t be eligible for the balance transfer offer.
  • If the card application has been approved
    If your credit card and balance transfer was approved, call up the new credit card company and tell them your concerns. Sometimes applications are processed quickly and they won’t identify the problem until they try to transfer the balance. In other cases, you may get approved for the card but not the balance transfer. Calling up to talk to someone stops the problem from getting more complicated, and protects you from any unnecessary charges.
  • If the card application has been declined
    This is most probably because it's issued by the same provider. You can still apply for a different balance transfer card, but just remember that all your applications will be listed on your credit file, and applying for too many in a short amount of time could reduce your credit score.
  • If you actually want to transfer a balance to a card with your existing issuer
    Some credit card issuers offer balance transfers specifically for existing customers, which gives you a legitimate option if you want to stay with your issuer but choose a different card. Contact them directly to see what’s possible for your circumstances.
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Problem: Only getting approved for part of the balance transfer

When you apply for a balance transfer, issuers only allow you to transfer a certain percentage of the credit limit you are approved for on the new card. This is usually between 70% and 95% of the total credit limit. (Note: This is the maximum you can transfer, but you can also transfer a lower amount if you have less debt).

The problem is that you won't know what your approved credit limit is until the card has been approved. In some cases, this could mean your credit limit is lower than the amount of debt you want to transfer onto the new card.

What to do about it

If you’re approved for a credit limit that doesn’t allow you to move the entire debt, the issuer may automatically offer you a partial balance transfer. For example, say you want to balance transfer $5,000 of debt onto a card offering transfers worth up to 90% of your approved credit limit. If were approved for a $5,000 credit limit, the new issuer might transfer $4,500 (90%) of your debt over and leave you with a $500 balance on your old card.

If that happens, you have two main options:

  • Cancel the application once the new issuer sends you details of the suggested account terms. Make sure you do this as soon as possible and don't activate the card.
  • Pay off the remaining debt on the old card as soon as possible so you can focus on dealing with the rest of it at the lower promotional balance transfer rate offered on the new card.

Remember: you should receive information on the new credit card once it is approved, giving you a chance to review the terms and conditions before accepting or declining the new card.

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Problem: Paying more fees than expected

While a balance transfer credit card may offer you an introductory 0% p.a. interest rate, you may be charged other fees when you get the card. The key ones to watch out for are:

  • Balance transfer fees. Some credit card companies charge a one-time fee for processing your balance transfer. This fee is around 2-3% of the total debt you move onto the card, although it does vary between cards and offers.
  • Annual fees. If the new credit card has an annual fee, it could be charged when the account is first opened. These fees usually aren't eligible for any 0% p.a. balance transfer rate, which means they attract interest from the time they are added to your account. Meanwhile, if you cancel your old card, you could also be charged one final annual fee, depending on when you close the account.

What to do about it

  • Check for potential fees before you apply. The fees and charges will be in the Key Facts Sheet as well as the card's product disclosure statement. If you're unsure about the costs, call the credit card company and ask directly.
  • Contact the credit card company as soon as you notice an unexpected charge and ask them to explain it. It might also be a good idea to go over the terms and conditions of the account, just to be sure that they do mention these fees (if not, you might be able to dispute them).
  • Pay off the charges as quickly as possible – even if it means adjusting your budget a little in the process. At least then you can avoid or at least reduce the amount of interest that you pay for them and then get back to paying down your existing debt.
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Problem: Forgetting to make payments

This mistake often comes up with 0% balance transfer offers, which can sound like a great way to not pay down your debt for months. It’s important to remember that even if there is no interest applied to the balance, you will still have to pay at least the minimum required for each statement period. Otherwise, you could end up dealing with late payment fees and other penalties.

Making payments to your old card

Applying for a balance transfer is only the beginning of the process when it comes to moving debt from one card to another. From there, you have to get approval and then wait for the new issuer to process the transfer, which typically takes up to 10 working days.

In the meantime, the balance on your old card will accrue interest as usual and you will still need to make any payments that are due so that you don’t end up with late payment fees or other penalties.

What to do about it

  • If you forget to make a payment on your old or new account, contact the relevant credit card company straight away. Explain that you have missed a payment due date and let them know when you plan on making it (or make it straight away and tell them).
  • Set reminders on your phone or a calendar so that you can pay at least the minimum amount before the due date on each statement. Alternatively, you could set up an automatic debit from your bank account.

Problem: Keeping your old credit card open

When you get a balance transfer credit card, it is your responsibility to decide what you do with the old credit card. mIf you don’t cancel the old credit card, there could be a temptation to use it to make purchases (and further grow your balance). It could also attract new interest charges and annual fees, and will also mean you have more payments to deal with every month.

What to do about it

You can cancel the old credit card account at any time with the following steps.

  1. Make sure there is no balance on the old card.
  2. Cancel any direct debits from the account (or transfer them to a different account).
  3. Transfer or redeem any rewards or frequent flyer points you've accumulated.
  4. Contact your old credit card company or go to their website and complete an account cancellation form.
  5. Check the account balance again – to make sure you've paid any closing charges.
  6. Request written confirmation from your old credit card company when the process is complete.
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Problem: Making new purchases on a balance transfer card

Any new purchases you make on a balance transfer credit card will be charged interest at the purchase rate, not the promotional balance transfer rate. Plus, you won’t be able to take advantage of any interest free days, which only apply when you have a zero balance.

As banks are forced to repay the balance that’s accruing the highest interest first, your purchases that collect the standard interest rate will be paid off before your transferred balance. Given the low or 0% balance transfer offer is only in place for a set number of months, it’s important to not waste that time paying off purchases so you can repay your balance before the offer ends.

What to do about it

  • If you have used your new card for purchases, make paying off these charges a priority. At the very least you should aim to increase your monthly repayment amount to factor in this new debt.

Managing new purchases on a balance transfer credit card

Problem: Carrying a balance when the introductory rate reverts

Whether the introductory interest rate on a balance transfer card lasts for 6 months or 24 months, eventually it will revert to the higher, standard rate of interest. This means you could go from paying 0% p.a. interest to 22% p.a. interest, so it's ideal to pay the debt before the introductory rate expires.

What to do about it

  • If you’re one of the many people who end up with a remaining balance when the introductory rate reverts, the priority should be to pay of the debt as quickly as possible. This could mean adjusting your budget and making bigger monthly payments, or using savings or other lump sums of money to clear the balance.
  • Another option is to make weekly payments as soon as you get your salary – even though credit card interest is charged monthly, it’s actually calculated daily, so if you make more frequent payments you can reduce the overall amount of interest that you pay.
  • Depending on your circumstances and creditworthiness you could also consider a second balance transfer or a debt consolidation personal loan.

Balance transfers come with so much fine print that there is often confusion or a lack of awareness about exactly how they work – which can lead to lots of costly mistakes. Now you know how to deal with these kinds of issues, you can get past them and learn from them so that you avoid them altogether in the future.

Compare balance transfer credit cards

Data indicated here is updated regularly
$
% p.a.
Name Product Balance transfer rate Purchase rate Annual fee Amount saved
Skye Mastercard - Exclusive Offer
0% p.a. for 25 months
23.99% p.a.
$99
Finder Exclusive
Save with 0% p.a. on balance transfers for 25 months, up to 110 days interest-free on purchases and flexible instalment plan options.
ANZ Low Rate - Exclusive Offer
0% p.a. for 25 months with 1.5% balance transfer fee
12.49% p.a.
$0 annual fee for the first year ($58 p.a. thereafter)
Finder Exclusive
Save with 0% p.a. on balance transfers for 25 months (with a 1.5% BT fee) and $0 first year annual fee.
Citi Rewards Card - Balance Transfer Offer
0% p.a. for 30 months with 1.5% balance transfer fee
21.49% p.a.
$0 annual fee for the first year ($199 p.a. thereafter)
Save with 0% interest on balance transfers for the first 30 months (with a 1.5% BT fee) and a $0 annual fee for the first year.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
0% p.a. for 22 months
20.74% p.a.
$64 annual fee for the first year ($129 p.a. thereafter)
Get 0% p.a. for 22 months on balance transfers and a reduced first-year annual fee. Plus, earn up to 30,000 bonus Velocity Points. Ends 30 Sept 2020.
Westpac Low Rate Card
0% p.a. for 20 months with 1% balance transfer fee
13.74% p.a.
$59
A low rate card offering 0% p.a. interest on balance transfers for the first 20 months and a $200 cashback offer.
HSBC Platinum Credit Card - Balance Transfer Offer
0% p.a. for 22 months
19.99% p.a.
$129
Enjoy a 22-month balance transfer offer, travel insurance and an annual fee refund when you spend an eligible $6k/year. Ends 30 Sept 2020.
Coles No Annual Fee Mastercard
0% p.a. for 18 months with 1.5% balance transfer fee
19.99% p.a.
$0
Earn flybuys points for your spending and save with an ongoing $0 annual fee and 0% p.a. on balance transfers for 18 months.
St.George Vertigo Classic
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
Get 0% p.a. promotional purchase and balance transfer rates and save with a first-year annual fee waiver. Ends 30 Sept 2020.
Citi Clear Card
0.9% p.a. for 15 months
0.9% for 15 months, reverts to 14.99% p.a.
$99
Save with 0.9% p.a. for 15 months on purchases and balance transfers. Plus, complimentary purchase insurance cover.
HSBC Platinum Qantas Credit Card
0% p.a. for 12 months
19.99% p.a.
$99
Receive 20,000 bonus Qantas Points and a long-term balance transfer offer. Plus, complimentary travel insurance. Ends 30 Sept 2020.
Bank of Melbourne Vertigo Classic
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
Save with 0% p.a. for 7 months on purchases, 0% p.a. interest for 22 months on balance transfers and a $0 first-year annual fee. Ends 30 Sept 2020.
BankSA Vertigo
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
Enjoy a 0% p.a. for up to 22 months on balance transfers and up to 7 months on purchases. Plus, $0 first-year annual fee. Ends 30 Sept 2020.
NAB Low Rate Credit Card
0% p.a. for 20 months with 2% balance transfer fee
12.99% p.a.
$59
Receive an introductory 0% p.a. interest rate for 20 months on balance transfers, Visa Entertainment offers and a competitive $59 ongoing annual fee.
St.George Vertigo Classic Rainbow
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
All the great low cost features of the Vertigo Visa with a rainbow design in support of the LGBT community.
Virgin Australia Velocity Flyer Card - 0% Interest Offer
0% p.a. for 6 months
0% for 14 months, reverts to 20.74% p.a.
$64 annual fee for the first year ($129 p.a. thereafter)
Enjoy 0% p.a. interest on purchases for 14 months, a reduced first-year annual fee and Velocity Points per $1 spent. Ends 30 Sept 2020.
St.George Amplify Platinum - Qantas
0% p.a. for 6 months
19.74% p.a.
$99
Earn 60,000 bonus Qantas Points, plus enjoy 0% p.a. on balance transfers for 6 months and complimentary insurance covers. Ends 30 Sept 2020.
St.George Amplify Platinum
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 19.74% p.a.
$0 annual fee for the first year ($99 p.a. thereafter)
Save with 0% p.a. interest rates on purchases and balance transfers. Plus a $0 first-year annual fee. Ends 30 Sept 2020.
Westpac Altitude Platinum Qantas
0% p.a. for 18 months with 1% balance transfer fee
20.49% p.a.
$99 annual fee for the first year ($200 p.a. thereafter)
Get 60,000 bonus Qantas Points when you spend $3,000 within 90 days. Plus, a first-year annual fee discount and a long-term balance transfer offer.
Westpac Altitude Platinum Card
0% p.a. for 18 months with 1% balance transfer fee
20.49% p.a.
$99 annual fee for the first year ($150 p.a. thereafter)
Earn 80,000 bonus Altitude Points when you spend $3,000 within 90 days. Plus, a first-year annual fee discount and a long-term balance transfer offer.
Bank of Melbourne Amplify Platinum
0% p.a. for 22 months with 1.5% balance transfer fee
0% for 7 months, reverts to 19.74% p.a.
$0 annual fee for the first year ($99 p.a. thereafter)
Enjoy 0% p.a. on purchases and balance transfers along with a $0 first year annual fee waiver. Ends 30 Sept 2020.
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6 Responses

  1. Default Gravatar
    LorraineAugust 19, 2012

    What other options are there besides balance transfers to handle credit card debt if you can’t pay it off? Would it be a personal loan if you are unable to do a mortgage top up?

    • Avatarfinder Customer Care
      JacobDecember 14, 2012Staff

      Hi Lorraine. Thanks for your question. We spoke to NAB about this very topic. Here’s a snippet from our conversation.



  2. Default Gravatar
    ShantellAugust 18, 2011

    I am looking at getting a balance transfer for my 2 store cards (overall limits $11,800.) I have 2x interest free purchases on those cards that I DO NOT want to balance transfer. Im not sure how to go about this.

    • Avatarfinder Customer Care
      JacobMarch 28, 2013Staff

      Hi Shantell. You can transfer the balance from multiple store cards; however, I don;t believe it’s possible to select certain transactions to transfer. Perhaps speak to the bank about this. Sorry for the delay in the response.

  3. Default Gravatar
    VanJuly 28, 2011

    Hello, why do these articles not suggest the workaround solution on balance transfer traps: Once the low interest rate period on balance transfer is up, transfer the balance BACK over to your old card, and get a whole new period of low interest rates. Is there any information on this method, and how often it can be done?

Credit Cards Comparison

Data indicated here is updated regularly
Name Product Purchase rate Balance transfer rate Annual fee
Skye Mastercard - Exclusive Offer
23.99% p.a.
0% p.a. for 25 months
$99
Finder Exclusive
Save with 0% p.a. on balance transfers for 25 months, up to 110 days interest-free on purchases and flexible instalment plan options.
ANZ Low Rate - Exclusive Offer
12.49% p.a.
0% p.a. for 25 months with 1.5% balance transfer fee
$0 annual fee for the first year ($58 p.a. thereafter)
Finder Exclusive
Save with 0% p.a. on balance transfers for 25 months (with a 1.5% BT fee) and $0 first year annual fee.
NAB Qantas Rewards Signature Card
19.99% p.a.
0% p.a. for 6 months with 2% balance transfer fee
$295 annual fee for the first year ($395 p.a. thereafter)
Collect up to 130,000 bonus Qantas Points. Get 100k when you spend $3,000 on eligible purchases in the first 60 days and 30k after 12 months.
ANZ Platinum Credit Card
0% for 17 months, reverts to 20.24% p.a.
20.24% p.a.
$0 annual fee for the first year ($87 p.a. thereafter)
Receive a 0% purchase rate offer for 17 months and a $0 first-year annual fee. Plus, complimentary overseas travel and medical insurance.
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* The credit card offers compared on this page are chosen from a range of credit cards finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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